AT&T (T) The Opposite of Momo

I like reading Howard Lindzon’s blog where he shares his strategy with following momentum stocks.

Some people are great at chasing momentum and leaning into a trend that is working, but others are too tightly wound to make it work.

  • Either they need to make position sizes so small as to be inconsequential to where
    • most their capital remains in cash, or
    • they have so many positions they are a closet indexer adding ill-timed trades to further lower returns, or
    • they have too much savings at risk in a particular play they might not know well enough to stick with if the trade goes against them

Who knows if the day after you invest in a foreign tech stock sanctions get announced, or if the CEO of a fast-growing money losing Chinese startup like JD.com gets arrested over the weekend, driving the stock price down 14%, from near the bottom of the range the stock price was already in.

If you don’t look at the scoreboard every day and a trade you deeply understand and believe in temporarily goes against you that isn’t so bad. But if you keep looking and feel the need to keep doing something (even when things seem like they are not working) then each additional move feeds into the prior mistake.

Make a few shitty trades like that and it is easy to want to beat your head on your monitor.  If trades go against you & you are actively trading then perhaps sometimes the only way to recalibrate your approach is to liquidate positions and sit on the sidelines for a few days to decompress. I did that a few weeks ago (hence the lack of blog posts).

It is not hard to be an honest and decent human being. As long as you are honest you will know when you need to take a break or to pull back from risk.

Around the time of the Amazon $1 trillion story I saw how AT&T was once again getting pounded into the ground when the tech stocks were flying. I didn’t have the mental cycles or capacity to chase the momentum stocks at the time, but felt the AT&T dividend acted as nice ballast which would be appreciated whenever the next risk-off narrative came about.

A 6% dividend is getting paid to wait. And that dividend is stable, with a good coverage ratio. They’re a dividend aristocrat stock which has a long history of increasing dividend payments.

In isolation that  return is substandard if you look at the 10% total returns the stock market has earned in recent history, but that dividend has been growing over time.  If you look at what other media assets are selling for, AT&T didn’t overpay for Time Warner. And the idea that carriers are going to lose consumer appeal is highly suspect while reading all the articles about the modern crisis of attention & widespread cell phone addiction.

Many people would likely dumpster dive for their meal before foregoing using their cell phones.

Verizon & AT&T do not have much competition from other wireless providers on a forward basis as the increased costs of 5G roll out require T-Mobile & Sprint to merge to try to keep pace with the market leaders. And those companies have every bit the issues with debt load as AT&T does.

Even Warren Buffett described his large Apple stake as a bet on the real estate of the iPhone screens.

Carriers get an annuity for selling access.

Other competition also remains at bay as 5G will enable the cell phone companies to encroach on the cable companies faster than the cable companies can seriously compete with the cell phone carriers. Google Fiber was much hyped, but ultimately a flop.

AT&T is still hated (off over 18% from their 52-week highs & about 1/3 from their August 2016 highs as a low-beta high-yield stock) but it is less stressful to trade in and out of AT&T than the momentum stocks.

If the trade goes the other way you get paid to wait & the lower stock price drives in demand from value-seeking dividend investors. If the stock gets a decent pop over 2 or 3 days you could easily trade a portion of the holdings and then re-consider entering again if it touches $32 again.

I sold out of my AT&T trade about 45 minutes ago, but if the stock falls another dime or two I might jump back in.

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